Reform of the hospital sector in Georgia

Tengiz Verulava  Avtandil Jorbenadze

Journal number 3 ∘ Tengiz Verulava ∘ Avtandil Jorbenadze ∘
Reform of the hospital sector in Georgia

Expanded Summary

The process of reorientation of the healthcare system, which began in 1995, envisaged the rationalization of hospital inpatient services. Optimizing the hospital system required efficient management of human and material resources. In order to decentralize medical organizations, hospitals were given full management freedom. Hospitals were given the opportunity to decide personnel allocation based on the rules. Hospital managers were given more autonomy in determining employee wages and other financial resources. Advisory boards should be established to involve the population and other stakeholders in the management of hospitals.

The burden of state financing of medical organizations was distributed between the central and local governments. Local health care funds were created, which received revenues from municipal budgets.

The budgetary and statutory funding of hospitals was replaced by target-program funding, which meant reimbursing the activity of the medical institution and healthcare workers in accordance with the volume, quality, and importance of the work performed.

Instead of financing only from the state budget, hospitals received income from five main sources: from the State Medical Insurance Company and the Ministry of Health, municipal funds, co-payments, internal standards, and other income activities.

When creating a new hospital financing system, the choice was stopped based on the model of financing with medical economic standards, which took into account the principles of the world-recognized cost-effective method, diagnosis-related groups (DRG) financing.

A plan for the privatization of the hospital sector was developed, which meant dividing the sector into three groups: Group A hospitals were to remain state-owned, Group B hospitals were to be privately owned, although they had to maintain their medical profile for a period of 10 years, and Group C hospitals were to be sold as just real estate.

The hospital reform envisaged the promotion of the development of various forms of ownership of medical organizations, both state and private for-profit and non-profit medical organizations. Thus, the competition between the forms of ownership of medical organizations would increase, which would contribute to the ability of the patient to choose the medical institution, increase the quality of medical services, to contain the costs of health care.

Despite the achievements, reforming the hospital sector turned out to be more difficult than expected, which was related to the difficult economic situation in Georgia. Due to constant economic crises, the state often failed to finance the promised obligations, and as a result, hospitals suffered from chronic funding deficits.

Subsequent governments abandoned the plan to reorient the hospital sector developed in 1995, and medical economic standards were removed. In this regard, it would be desirable to study the Georgian experience of hospital reforms in 1995-2003.

Citizens of Georgia deserve the right to receive high-quality, qualified medical care, which is guaranteed by the Constitution of Georgia. Today, the ongoing changes in the healthcare sector are more fragmented. A systematic approach to healthcare sector reforms is needed, which involves increasing the volume of state financing of healthcare, promoting the introduction of modern technologies, introducing methods of financing based on the results of medical service reimbursement, raising the professional level of medical personnel, creating indicators for evaluating medical services, and introducing effective cost containment mechanisms.

EKONOMISTI The international scientific and analytical, reviewed, printing and electronic journal of Paata Gugushvili Institute of Economics of Ivane Javakhishvili Tbilisi State University

DOI: 10.36172/EKONOMISTI E ISSN 2346-8432 Print ISSN 1987-6890	Journal number 3 ∘ Tengiz Verulava ∘ Avtandil Jorbenadze ∘ Reform of the hospital sector in Georgia Expanded Summary The process of reorientation of the healthcare system, which began in 1995, envisaged the rationalization of hospital inpatient services. Optimizing the hospital system required efficient management of human and material resources. In order to decentralize medical organizations, hospitals were given full management freedom. Hospitals were given the opportunity to decide personnel allocation based on the rules. Hospital managers were given more autonomy in determining employee wages and other financial resources. Advisory boards should be established to involve the population and other stakeholders in the management of hospitals. The burden of state financing of medical organizations was distributed between the central and local governments. Local health care funds were created, which received revenues from municipal budgets. The budgetary and statutory funding of hospitals was replaced by target-program funding, which meant reimbursing the activity of the medical institution and healthcare workers in accordance with the volume, quality, and importance of the work performed. Instead of financing only from the state budget, hospitals received income from five main sources: from the State Medical Insurance Company and the Ministry of Health, municipal funds, co-payments, internal standards, and other income activities. When creating a new hospital financing system, the choice was stopped based on the model of financing with medical economic standards, which took into account the principles of the world-recognized cost-effective method, diagnosis-related groups (DRG) financing. A plan for the privatization of the hospital sector was developed, which meant dividing the sector into three groups: Group A hospitals were to remain state-owned, Group B hospitals were to be privately owned, although they had to maintain their medical profile for a period of 10 years, and Group C hospitals were to be sold as just real estate. The hospital reform envisaged the promotion of the development of various forms of ownership of medical organizations, both state and private for-profit and non-profit medical organizations. Thus, the competition between the forms of ownership of medical organizations would increase, which would contribute to the ability of the patient to choose the medical institution, increase the quality of medical services, to contain the costs of health care. Despite the achievements, reforming the hospital sector turned out to be more difficult than expected, which was related to the difficult economic situation in Georgia. Due to constant economic crises, the state often failed to finance the promised obligations, and as a result, hospitals suffered from chronic funding deficits. Subsequent governments abandoned the plan to reorient the hospital sector developed in 1995, and medical economic standards were removed. In this regard, it would be desirable to study the Georgian experience of hospital reforms in 1995-2003. Citizens of Georgia deserve the right to receive high-quality, qualified medical care, which is guaranteed by the Constitution of Georgia. Today, the ongoing changes in the healthcare sector are more fragmented. A systematic approach to healthcare sector reforms is needed, which involves increasing the volume of state financing of healthcare, promoting the introduction of modern technologies, introducing methods of financing based on the results of medical service reimbursement, raising the professional level of medical personnel, creating indicators for evaluating medical services, and introducing effective cost containment mechanisms.